Uber arrived in Barbados in October last year and, by my estimation, was given a rather unusual welcome. It wanted to offer rides through an app but was told, in no uncertain terms, that only licensed taxi operators could participate and that fares would remain those set by Government. Protests followed, meetings were held, and an agreement kept Uber away from the Bridgetown Port for the 2025/26 winter season. Yet some 400 taxi operators signed up. Imagine arriving to compete with the taxi stand and discovering that you must first recruit its operators. Quite the interesting predicament.
I found this amusing, but not necessarily bad. Taxi drivers have invested in permits, insurance and vehicles. They should expect the rules to apply to everybody. Equally, an app is hardly the devil's handiwork simply because it makes finding a taxi easier. Herein lies the complication. Uber cannot, under existing rules, flood the market with private cars as it has elsewhere. It must convince operators that placing an app between themselves and their customers is worth the trouble.
Recent complaints about the alleged use of private and commercial-plated vehicles deserve investigation. Allegations, however, are not evidence. What interests me more is the argument about fares. An operator recently gave the example of a journey ordinarily costing $24 appearing for roughly $10 on a platform. Government sets those fares. Someone must explain where the other $14 has gone.
Uber said at launch that initial price discrepancies came from automatic discounts and that drivers would receive regulated fares. If that remains true, some interesting economics may be at work. Assume a regulated journey costs $24 and Uber charges a 20 per cent commission. The driver receives $19.20. If the passenger pays only $10, Uber must cover the difference, losing $9.20 before its other expenses. Imagine paying people, in effect, to shop with you. It sounds ridiculous until we consider the possible reward.
Of course, if the driver's payment falls with the passenger's, the driver, rather than Uber, may be funding the bargain. Both possibilities warrant investigation. I would rather see the transaction statements than a marketing explanation.
Economists call this loss-leading. I prefer to think of it as paying the entrance fee to somebody else's party. Offer passengers a bargain, persuade drivers that the extra jobs justify the commission, and soon both reach instinctively for the same app. More drivers make it more useful to passengers; more passengers make drivers reluctant to switch it off. These are network effects. They can become quite powerful.
Barbados presents a curious proposition. We are small, demand is affected by the tourism season, and there is only so much daily traffic to go around. Cheap rides may build a habit quickly. Whether it survives when tourists leave and discounts disappear is another matter. The company must also find enough business outside the winter season to recover its promotional spending. For the moment, buying market share may be cheaper than earning it one passenger at a time.
This brings me to a question. What happens when passengers look first to Uber and taxi operators feel compelled to follow? I suspect the company may eventually ask Government to reconsider the fare arrangements or platform-fee rules. I have no evidence that it plans to do so. Nevertheless, it would be peculiar to assume that a multinational intends to subsidise our taxi rides indefinitely.
Nor should we pretend that an app's share of the fare is fixed forever. Oxford researchers studying British Uber journeys found the commission in their sample rising from roughly 25 to 29 per cent following pricing changes. This does not prove Barbados will follow suit. It does illustrate how introductory economics and the economics of an established platform may differ.
Nigeria provides a useful detour. Uber entered Lagos in 2014, lowered fares in 2017 and promised top-ups to protect drivers. By 2020, drivers were protesting commissions they said had risen from 20 to 25 per cent. Bolt and inDrive offered alternatives, while Lagos introduced licensing requirements amid disputes over charges. Then, on 2 September this year, Uber left Nigeria after twelve years. The company did not attribute its departure to competitors or regulation; its investment priorities and difficult market conditions also mattered. The lesson is simply that even Uber does not write every ending..
Brazil tells another story. In 2018, Uber replaced fixed commissions of 20 and 25 per cent with a variable charge. This does not prove average commissions increased, but demonstrates how the rules governing what a platform retains may change. Competitor 99 has grown enormously, reporting over 60 million users, while inDrive offers another pricing model. Brazil's 2018 legislation also empowered municipalities to regulate app-based transport and enforce driver and insurance requirements. Uber remained important, but not beyond competition or public oversight.
Where does this leave Barbados? Government should establish who is using the platform, whether discounted rides comply with fare rules and precisely who receives what from each transaction. Taxi operators should be free to use competing apps, including local ones, rather than exchange one dependency for another. I would also like to know how much of our taxi revenue ultimately leaves the island. That is not hostility towards foreign investment. It is a question about where the economic value is captured.
Which takes us back to the taxi stand. Uber needed its drivers to get into Barbados. We should ensure that, having allowed it into the queue, we do not eventually let it own the stand and charge everybody rent.